TY - JOUR
T1 - Intertemporal consumption and credit constraints
T2 - Does consumption respond to an exogenous shock to credit?
AU - Leth-Petersen, Søren
N1 - JEL classification: D14, D91, E21
PY - 2010/6
Y1 - 2010/6
N2 - There is continuing controversy over the importance of credit constraints. This paper investigates whether total household expenditure and debt is affected by an exogenous increase in access to credit provided by a credit market reform that enabled Danish house owners to use housing equity as collateral for consumption loans. We find that the magnitude of the response is correlated with the amount of equity released by the reform and that the effect is strongest for younger households. Even for this group, the response was moderate. The aggregate effect of the reform was significant but small.
AB - There is continuing controversy over the importance of credit constraints. This paper investigates whether total household expenditure and debt is affected by an exogenous increase in access to credit provided by a credit market reform that enabled Danish house owners to use housing equity as collateral for consumption loans. We find that the magnitude of the response is correlated with the amount of equity released by the reform and that the effect is strongest for younger households. Even for this group, the response was moderate. The aggregate effect of the reform was significant but small.
U2 - 10.1257/aer.100.3.1080
DO - 10.1257/aer.100.3.1080
M3 - Journal article
SN - 0002-8282
VL - 100
SP - 1080
EP - 1103
JO - American Economic Review (Print Edition)
JF - American Economic Review (Print Edition)
IS - 3
ER -